Summer is here – a little bit earlier than we expected and the temperatures are fast rising.  We all know how messed up the world’s climate has been and it doesn’t seem to be getting better for this hot season.  I can just foresee heat waves occurring all across the continent. I don’t want to be negative but I want to be prepared.  After all, I don’t want to spend my time at home sweltering in the stifling heat.  The thing is, my luck has not held out lately.  For one, my trusty old air conditioning unit – which I have not used much, by the way – has decided to give up on me.  Oh it still turns on but it does not seem to be cooling up the room much.  So what good would that do me?

I have three options before me.  One, ditch the old one and get a new unit.  Two, have the old unit repaired.  Three, forget about air conditioning.  I would really prefer the first two options but I do not really have the money to do either right now.  Maybe I can wait till I get that extra money but in the meantime, I would have to literally sweat it out.

Then I thought about getting a payday loan.  A payday loan is a kind financial product that can provide me with the relatively small amount of money that I need – enough to either repair my air conditioning unit or buy a new one.  It is meant to deal with temporary cash needs that the average person might find himself facing in his every day life.

It is quite easy to avail of a payday loan.  All I have to do is go online as most payday loan providers in the UK operate online.  There are many payday loan providers operating in the UK.  The trick is in finding one which operates in your area of residence and has terms and conditions that would suit my needs and preferences.  I have found out that there are considerable choices for me.

Once I have decided which payday loan lender to deal with, I only need to fill out their application form – it looks really short and easy to fill out.  According to their FAQs and other information found on their web sites, payday loan lenders will get back to you as soon as possible – within several hours at the most.  Generally, everyone gets approved for a payday loan.  This is because there is no credit check required.  All that I have to prove are the following:

-I am a resident or a citizen of the UK
-I am at least 18 years old
-I have a regular source of income (yes I have a job!  OR alternatively, a business that I own)
-I have a current bank account.

I think that the most important thing that they look at is whether or not the borrower has a regular source of income.  This is all they proof that they need that a person can pay off the loan.  It is pretty convenient, don’t you think so?

What is the biggest thing that you fear when you consider taking out a loan?  If you are like most people, your answer would probably be the credit check.  What is a credit check anyway?  It is simply the examination of your credit record or history.  In turn, your credit history or record is defined by Wikipedia as “a record of an individual’s or company’s past borrowing and repaying, including information about late payments and bankruptcy. The term “credit reputation” can either be used synonymous to credit history or to credit score.”

Quite obviously, your credit record can spell the difference between a loan application being approved or denied.  It is thus no wonder that many people hold such fear or even dislike of the credit check!  The difficult thing about the whole process is that even though there are specific entities in the United Kingdom which gives out a credit report, the final credit rating depends on the individual lenders.  More so, the way they interpret your credit score is not always the same.  In a sense, this can be subjective and sometimes, you may not really understand why you have been denied for a loan.  These things are a few of the main reasons people do not really appreciate credit checks.

It is not only that, though.  Having to conduct a credit check means having to spend more time on the loan process.  A credit check can take weeks, or even months in some cases, to complete.  As such, the credit check is one of the reasons for prolonged waiting period for some loans.

That is why a payday loan is a very good alternative for those who are in need of quick cash.  It is even better for those who are in need of quick cash AND who are not sure about their credit rating.  This is because payday loan lenders do not require credit checks for approval.  In fact, the term credit check does not come into the picture when it comes to payday loans.  That is why they are also sometimes dubbed as bad credit loans.  Even if you have the worst credit rating in all of the UK, you still have a very good chance of getting approved for a payday loan.

So are there any requirements for getting a payday loan?  Of course!  Just because they do not ask for credit checks, it does not mean that you do not have to fulfill certain requirements.  These are quite few and simple, though:

-you must be a citizen or resident of the UK
-you must be at least 18 years old
-you must have a secure source of income (a job or your own business)
-you must have a current bank account.

There may be additional requirements needed, depending on the payday loan provider that you deal with but they are generally easy to fulfill as well.  The important thing is that you do not have to worry about having missed a payment or two in the past.  It simply does not matter when it comes to payday loans.

…what would happen to the average person who suddenly finds himself facing a very tight financial situation?  Those who are vehemently opposed to payday loans would probably retort “They would be able to find cash through some other means or from other sources.”  Though this may be true, those other means or sources may not always be feasible.  Let us take a look at some of them:

-Parents:  our parents will always be willing to give us a helping hand when we need it, I am sure.  Yet doesn’t make it you uncomfortable to keep on asking your parents for money when you are over 21?  More so, what if your parents do not really have the money to lend you anyway?

-Other family members:  as with our parents, I am sure that other members of our family will also be willing to help us out in times of need.  However, if you feel uncomfortable asking your parents for money, how much more when it comes to other family members?  In addition to this, they may have families of their own.  This means that they also have their own responsibilities to deal with.

-Friends and colleagues:  kindhearted people will almost always lend you money but are you willing to risk your relationships because of finances?  Not everyone is comfortable when other people approach them for help financially.  And again, they themselves may not have the extra money to lend you.

-Your local bank: do you have what it takes to be approved for a conventional loan?  Banks and other traditional financial institutions are quite strict when it comes to lending money.  They will ask for a lot of documentation and requirements before they lend you money.  More so, it takes a long time to avail of a loan through the bank.

-Your credit card: don’t you have enough credit card debt already?  And what if you cannot use your credit for this particular need that you are facing?  Are you willing to pay the high cash advance fees on top of the regular credit card fees?

So back to my original question.  What would happen if payday loan providers are run out of business?  The most probable scenario that I am seeing is that the average person will be tough out of luck.  His options would even be more severely limited.

What we need to realise is that payday loans exist for a purpose.  It is true that because of their accessibility and convenience, they tend to serve as temptations for some people.  These are the people who do not think ahead and merely borrow what they want, when they want.  These are the people who find themselves owing too much before they realise it.  These are the people who would probably find themselves in the same debt situation even if payday loans did not exist – they would fall into the debt trap through some other means.

But what about those people who are responsible borrowers?  People who know what they need and borrow only what they an afford to repay?  These are the people who can make use payday loans in the proper way.  These are the people who need payday loans to see them through tough times.

I ran across a very interesting article on payday loans today.  Truth be told, with all the reading that I do everyday, I really rarely come across articles on payday loans in the UK.  Articles, editorials, and write ups about payday loans and all the issues surrounding them are rife in the US – there is no doubt about that.  It seems that in the UK, though, the hype is not all that present.  As such, I was both surprised and pleased to see something about payday loans.  I’d like to share it with you:

A phenomenon which started in the United States so called payday loans are fast becoming popular here in the UK as a way of getting cash fast. Payday loans are very short term loans which can be approved and paid within a matter of hours.

The loans are designed to be leant over a period of one month and repaid at the end of the month when the customer receives their monthly paycheque. Small short term loans of no more than £750, they are advertised as the potential answer to temporary money worries, offering a fast cash injection to tide you over until payday.

The loans have been criticised for their shockingly high rates and the ease with which you can obtain one. The pre-requisites to qualify for a payday loan are simply to be over eighteen and in full time employment. No credit checks take place and there is no discrimination on the basis of your status or income.

What alarms financial experts as well as the ease in obtaining one of these loans is the high rates. Typically for each £100 borrowed, you pay back £125. That means that on a maximum loan of £750, you would pay back £937.50. The annual percentage rate (APR) for many of these companies is a massive 1,355.

However, APR is perhaps a misleading measure for these loans as they are not intended to be paid back over a period as long as a year. The charges are high when paying it back on time, but if you do take as long as a year to repay the loan, the costs can be devastating. An additional £25 charge is added to each £100 borrowed in addition to the £25 standard interest for each month that your payment is late. A £100 loan can escalate to £400 in 6 months and almost £1,400 over a year.

Many of these companies target young people advertising on social networking sites popular with young people, such as Facebook. In defence of the loans, a spokesman for the company behind Payday UK says that “bouncing cheques or incurring unauthorised overdraft fees, can work out considerably more expensive to the customer than the equivalent charges on a payday loan”, suggesting that payday loans can be the cheaper option for those struggling with the bills.

As you can see, there are two sides to the story – same case in the US.  I still think that there are both good and bad points to payday loans.  The important thing is to perceive everything in context and not compare things that are quite different by nature.  More so, a large part of the responsibility, again, lies in the borrower and not solely on payday loans.

It’s unfortunate that I don’t get to see a lot of news items on how payday loans are doing consumers a lot of good.  More often than not, what we read in the newspapers are articles bashing payday loans and the payday loan industry as a whole.  That is why when I see something that support payday loans, I take a deep look at it and see where its coming from.  After all, we could all learn something from it.

I ran across this article from a Kansas online newspaper – it is actually a letter to the editor.  I know it is not from this side of the ocean, but anything that details the benefits of a payday loan is worth taking a look at, in my opinion.

Here are some excerpts of that letter.

By ignoring industry data and independent research, the Kansan’s April 9 editorial about payday lending was typically one-sided and misled readers.Responsible payday lenders have helped millions of Kansas families make ends meet when facing urgent, unexpected expenses such as auto repairs, medical expenses or unusually exorbitant bills.

Current Kansas law already includes some of the strongest consumer protections in the country. Limits on loan amounts and fees and a ban on loan renewals prevent customers from abusing the product and from experiencing the kinds of annualized percentage rates referenced by industry critics.

In fact, the vast majority of payday loan customers appreciate access to short-term credit and use the product responsibly, to cover unexpected, urgent expenses or to avoid other, more-onerous fees such as those associated with bounced checks, overdraft “protection” and late bill payments. More than 90 percent use the product responsibly and pay their loans off according to loan terms.

For the small minority who — for whatever reasons — find themselves unable to meet their loan obligations, members of the national association of payday lenders — the Community Financial Services Association — offer extended payment plans that provide any customer — at any time, for no charge — more time to pay off their loan. That’s free credit!

Banning the industry would deny Kansas consumers the right to make their own choices, limit their credit options and force many to risky and more costly options such as unregulated off-shore Internet lenders and bouncing checks.

Let’s give reasonable, hard-working Kansans access to a variety of regulated credit options and trust them to make financial decisions based on what’s best for them and their families.

This letter was written by Tom Linafelt, presumably a person who has benefited from payday loans at one point in his life.  I think that anyone who has had the chance to take out a payday loan and was able to deal with an urgent financial matter as a result would feel the same way.

I think the operative word here is RESPONSIBLE.  This would be applicable to both the borrower and the lender.  On the one hand, the borrower must responsible enough to borrow only what he needs and can afford to repay.  On the other hand, the payday loan provider must also be responsible and not overcharge its customers as well as offer reasonable terms for repayment.